Tuesday August 14th

14-08-2018

Dow rises 100 points as Turkish lira rebounds

Stocks rose on Tuesday as a rebound in the Turkish lira from an all-time low lifted investor sentiment. The Dow Jones Industrial Average rose 100 points, while the S&P 500 gained 0.5 percent. Both indexes were also on track to snap four-day losing streaks. The Nasdaq Composite advanced 0.4 percent. Energy shares were among the best performers on Wall Street, as the sector rose nearly 1 percent on the back of a 1.3 percent gain in U.S. crude. Tech shares also contributed to the gains as Apple and Amazon both rose. Meanwhile, bank stocks rose as Goldman Sachs, Citigroup and Morgan Stanley all traded about 1 percent higher. The lira rose more than 5 percent to trade at 6.51 after falling to a record-low 7.24 per dollar on Monday. The currency has been under pressure recently as market watchers became jittery over Turkish President Recep Erdogan's control of the economy and Donald Trump saying last week that he supported doubling metal tariffs on the Middle Eastern country. Jeremy Klein of FBN Securities thinks the recent decline in U.S. stocks related to Turkey's turmoil will be short lived. "Turkey is not a member of the European Union or the euro zone, so it has less hooks into the European banks, which means less trouble for us," Klein, the firm's chief market strategist, said. "I think it will be well contained." Tensions between the two countries intensified after a Turkish delegation left Washington last week with no apparent progress on the detention of U.S. pastor Andrew Brunson, who is charged with supporting a group blamed for an attempted coup in 2016. Turkey is also dealing with an economic tailspin as inflation has surged there recently. Last month, Turkey's inflation rate hit 16 percent, well above the central bank's 5 percent target. The financial troubles have sparked fear of contagion across Europe. Emerging-market shares followed the lira higher. The iShares MSCI Emerging Markets exchange-traded fund rose about half a percent, putting it on track to snap a four-day slide. Turkish stocks jumped 7 percent to lead the gains while Brazil, Mexico and South Korea all climbed at least 1 percent. Home Depot reported second-quarter earnings and revenue easily topped Wall Street estimates. The company also raised its full-year earnings outlook. The stock rose in the premarket but fell about 1 percent after the open. The Dow component is the latest company to report better-than-expected quarterly earnings in what has been a very strong reporting season. Through Tuesday morning, 76.84 percent of S&P 500 companies that have topped analysts' earnings estimates, according to FactSet. Corporate earnings have grown more than 24 percent for the second quarter on a year-over-year basis. "Considering the [second-quarter] 2018 sales and earnings beat and growth rates, … there are not many negatives you can legitimately say about overall earnings at this point," said Nick Raich, CEO of The Earnings Scout. Asian shares closed mixed on Tuesday, as some regional markets bounced back one day after declining over jitters related to economic uncertainty in Turkey. The Nikkei 225 led gains, jumping 2.28 percent, or 498.65 points, to close at 22,356.08, as the yen gave up some of its recent strength — amid safe haven demand on uncertainty in Turkey. Elsewhere, South Korea's Kospi edged higher by 0.47 percent to end at 2,258.91. Greater China markets, however, declined, lagging their regional peers. Hong Kong's Hang Seng Index erased 0.74 percent by 3:00 p.m. The Shanghai Composite edged lower by 0.17 percent to close at 2,781.16 and the blue-chip CSI 300 declined 0.51 percent by the end of the session as markets digested a barrage of data released earlier. Oil prices jumped on Tuesday after Saudi Arabia said it cut production, adding to concerns over global supply as U.S. sanctions against Iran curb its exports. However, the prospect of a slowdown in global economic growth kept a lid on markets. Global benchmark Brent crude was up 79 cents, or 1.1 percent, at $73.40 by 10:30 a.m. (1430 GMT), after hitting a high of $73.93. U.S. light crude was up 73 cents, or 1.1 percent, at $67.93. Gold prices steadied near 18-month lows on Tuesday, attempting a break back above the key $1,200 level as the dollar eased and analysts said the precious metal could have fallen too far. Spot gold inched up 0.2 percent to $1,195.50 an ounce. In the previous session, the bullion hit $1,191.35, its lowest since Jan. 30, 2017. U.S. gold futures were up 0.3 percent at $1,202.70 per ounce.